Nortel gets OK to auction network carrier business

Nortel Networks Corp. Monday won court approval to put the bulk of its network carrier business on the bankruptcy auction block in July.

Judge Kevin Gross approved rules for the first major sale in Nortel's Chapter 11 case at a hearing in the U.S. Bankruptcy Court in Wilmington, Del.

Justice Geoffrey B. Morawetz, sitting simultaneously in Canada, also approved the rules for the auction by Nortel, once the pride of Canada's technology community.

A joint venture of Nokia Corp. and Siemens AG, Nokia Siemens Networks will set a floor price of $650 million for the auction of the assets, a combination of dated CDMA assets, and research and development capability for the next generation of wireless products.

Nortel filed for Chapter 11 protection loaded with $12 billion in debt. It has sold some businesses but recently announced it is looking for buyers for all of its assets. The auction approved Monday, the first large sale in the case, features a major cash-producing unit for Nortel.

Private-equity investor MatlinPatterson urged Gross to delay the auction of the revenue generator while it weighs the chances of offering reorganization funding to Nortel.

"There is no restructuring, your honor, once these assets are sold," said Jennifer Feldsher, attorney for MatlinPatterson.

Gross refused, citing the chances Nokia Siemens could walk away or cut its price if the deal is held up.

"My whole principle today is the bird in the hand," Gross said.

"There are really only two or three viable strategic purchasers for these assets in the entire world and we're one of them," said Nokia Siemens attorney Anthony Clark, of Skadden, Arps, Slate, Meagher & Flom.

MatlinPatterson is pondering an attempt to save Nortel from liquidation by providing financial support for a bankruptcy reorganization, Feldsher said.

A significant Nortel bondholder, MatlinPatterson is "very hopeful that with enough time and cooperation" it can help the big telecommunications equipment maker get out of bankruptcy without breaking up, Feldsher said in an interview.

"MatlinPatterson is looking very seriously at the possibility of supporting a Chapter 11 plan rather than the fire sale," said the attorney, who is with the firm of Bracewell & Giuliani.

Nortel argued against delaying the key sale on the grounds that the business had been shopped for months before it signed an opening bidder deal with Nokia Siemens.

"There's a thin line between being a bona fide bidder and being an irresponsible tease," said Nortel attorney James Bromley. He is with the firm of Cleary Gottlieb Steen & Hamilton.

MatlinPatterson could face intense time pressure if it does hope to put together a Nortel rescue. The Canadian company said Monday it's important to sell the carrier network business fast because it's racked up a 37% decline this year and Nokia Siemens could cut the price if the deal is delayed.

Nortel Chief Strategy Officer David Riedel said the company was forced to scrap hopes of reorganizing by big corporate customers who were leery of signing contracts with it due to its shaky financial condition.

The business being auctioned includes CDMA assets, which are in decline, and research and development assets, which need more of an investment than Nortel is able to make in them to pay off, Riedel said. Nortel is in active talks aimed at finding buyers for the rest of its businesses, he said.